6 hospitals, health systems hit with rating downgrades

Here is a summary of recent credit downgrades for hospitals and health systems going back to the most recent roundup March 16.

The various downgrades reflect continued operating challenges many nonprofit systems are facing and will likely continue to deal with for some years to come.

Mercy Iowa City Hospital: The hospital, part of Des Moines, Iowa-based MercyOne, was downgraded March 16 to "Caa1" from "B1" because of what Moody's called "severe cash flow deterioration."

The "Caa1" categorization is seen as "substantial risk."

Providence (Renton, Wash.): The 51-hospital system recorded the first of two downgrades in the space of a few days March 17 when Fitch Ratings attached an "A" grade to both the system's default rating and a series of bonds worth approximately $7.4 billion.

The outlook for the system is negative due to its higher-than-average debt loads, Fitch said.

S&P Global then downgraded Providence to the same notch from "A+" March 21 amid higher expenses and an expectation of only a multiyear process of recovery. 

The outlook for the system was also negative given the steep operating losses that need to be dealt with, S&P said.

PeaceHealth (Vancouver, Wash.): "Considerable operating stress" was the driver behind Fitch Ratings downgrading the 10-hospital system March 21.

The downgrade to "A+" from "AA-" applied to both the system's default rating and on a series of bonds. The outlook is stable.

Management is targeting a return to profitability by fiscal 2026, Fitch noted.

AU Health System (Augusta, Ga.): The system, which is being pursued by Marietta, Ga.-based Wellstar Health, was downgraded March 23 amid concern over negative cash flow and that it may breach covenant agreements later this year, Moody's said.

The downgrade to "B2" from "Ba3" applies to revenue bonds the system holds. The outlook is negative.

Oaklawn Hospital (Marshall, Mich.): The 68-bed community hospital was downgraded to "BBB-" from "BBB" as it reported operating losses due to higher expenses and length of patient stay, Fitch Ratings said March 29.

The downgrade refers both to its default rating and on bonds worth $63.5 million. The outlook is negative.

DCH Health (Tuscaloosa, Ala.): The three-hospital system saw its rating on a series of bonds lowered to "A-" from "A" as it continues to suffer operating losses, S&P Global said March 29.

The system's "deeply negative underlying operations" are unlikely to lead to any substantial improvement in the near future, the agency said.

DCH Health operates a total of 510 staffed beds.

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